Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Merge the OpenView Depth-of-Book Product Into TotalView, 27318-27322 [2017-12267]
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Federal Register / Vol. 82, No. 113 / Wednesday, June 14, 2017 / Notices
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–12265 Filed 6–13–17; 8:45 am]
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
BILLING CODE 8011–01–P
Electronic Comments
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Merge the
OpenView Depth-of-Book Product Into
TotalView
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2017–053 on the subject line.
Paper Comments
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• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2017–053. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2017–053, and should be
submitted on or before July 5, 2017.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80891; File No. SR–
NASDAQ–2017–054]
June 8, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 26,
2017, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to merge the
OpenView depth-of-book product into
TotalView, and to amend the
Exchange’s fees at Rules 7023 and 7026
to reflect the merger of these two
products, as described further below.
The Exchange has designated the
proposed amendments to be operative
on August 1, 2017.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s fees
at Rules 7023 and 7026 to merge the
OpenView depth-of-book product into
TotalView.
TotalView and OpenView
TotalView, the Exchange’s complete
depth data feed product for Nasdaqlisted securities, provides every eligible
order at every price level for all Nasdaq
members, as well as Net Order
Imbalance information.3 OpenView—
almost universally purchased in
conjunction with Nasdaq’s other depthof-book products, TotalView and Level
2 4—provides the same information as
TotalView for stocks listed on other
exchanges.
TotalView and OpenView may be
purchased through monthly
subscription fees or enterprise license
fees. Different fee structures apply if
purchasers opt to view TotalView or
OpenView using an Enhanced Display
Solution (‘‘EDS’’) or utilize the data in
a non-display fashion using a Managed
Data Solution (‘‘MDS’’). The current fees
associated with TotalView and
OpenView that will be affected by the
proposed changes, set forth in Rules
7023 and 7026, are as follows:
1. Per Subscriber Fees. Monthly NonProfessional per Subscriber fees are $14
for TotalView,5 and $1 for OpenView.6
Monthly Professional Subscriber fees
are $70 for TotalView,7 and $6 for
OpenView.8
2. Professional Subscriber Fees for
Non-Display Usage. The professional
Subscriber fees for Non-Display Usage
3 Net Order Imbalance information provides data
relating to buy and sell interest at the open and
close of the trading day, in the context of an Initial
Public Offering, and after a trading halt.
4 See Securities Exchange Act Release No. 79863
(January 23, 2017) 82 FR 8632 (January 27, 2017)
(SR–NASDAQ–2017–004) (explaining that Level 2
will be retired as a separate product).
5 Nasdaq Rule 7023(b)(2)(A).
6 Nasdaq Rule 7023(b)(3)(A).
7 Nasdaq Rule 7023(b)(2)(B). Fees are for Display
Usage, or for Non-Display Usage based upon
indirect access.
8 Nasdaq Rule 7023(b)(3)(B). Fees are for Display
Usage, or for Non-Display Usage based upon
indirect access.
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based upon direct access set forth in
Rule 7023(b)(4) allow for the purchase
of all depth-of-book products, including
TotalView, Level 2 and OpenView, for
one fee.9
3. Enterprise License Fees. The
enterprises [sic] license fees set forth in
Nasdaq Rules 7023(c)(1) and (c)(2) allow
for the purchase of TotalView and
OpenView, and the enterprise license
fees at 7023(c)(3) allow for the purchase
of all three depth-of-book products,
including TotalView, Level 2 and
OpenView, under the same fee
structure.10
4. Per Subscriber Fees for Enhanced
Display Solutions. The monthly fee for
Professional Subscribers using EDS
under Rule 7026(a)(1)(B) is $74 for
TotalView and Level 2 and $6 for
OpenView. Non-Professional
Subscribers of EDS pay the applicable
TotalView, Level 2 or OpenView rates.11
5. Enhanced Display Solution
Enterprise License. The EDS enterprise
license set forth in Rule 7026(a)(1)(C)
allows TotalView and Level 2 to be
distributed to an unlimited number of
Professional Subscribers for $70, and
OpenView for $6.
6. Managed Data Solutions. Rule
7026(b) sets forth a fee structure for
MDS that applies the same fees for the
distribution of TotalView, Level 2 and
OpenView.
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Proposed Changes
The Exchange proposes to amend the
fees at Rules 7023 and 7026 to merge
OpenView into TotalView. In substance,
the Exchange will combine all fees for
TotalView and OpenView into a single
sum, without increasing the total price
of the two products, and make a number
of conforming changes to delete specific
references to OpenView. The specific
fee changes to Rules 7023 and 7026 are
as follows:
1. Per Subscriber Fees. Monthly NonProfessional per Subscriber fees will be
changed from $14 for TotalView 12 and
9 The Rule 7023(b)(4) fees are based on the
number of Subscribers; the fee structure allows a
Subscriber to obtain any combination of TotalView,
Level 2 and OpenView, or all three products, for the
same per Subscriber fee.
10 The enterprise license fees set forth in Rules
7023(c)(1) and 7023(c)(2) are comprised of two
components: An enterprise license fee and perSubscriber monthly fees. A Distributor may obtain
any combination of TotalView, Level 2 and
OpenView, or all three products, for the same
enterprise license and per-Subscriber monthly fees
under Rules 7023(c)(1) and (c)(2). The fee structure
set forth in Rule 7023(c)(3) is an enterprise license
fee without per-Subscriber monthly fees. A
Distributor may obtain any combination of
TotalView, Level 2 and OpenView, or all three
products, for the enterprise license fee set forth in
Rule 7023(c)(3).
11 Nasdaq Rule 7026(a)(1)(B).
12 Nasdaq Rule 7023(b)(2)(A).
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$1 for OpenView 13 to $15 for
TotalView, which will be redefined in
current Rule 7023(a)(1)(C) to include
OpenView data. Monthly Professional
Subscriber fees will be changed from
$70 for TotalView 14 and $6 for
OpenView 15 to $76 for TotalView,
which will include OpenView data.
2. Professional Subscriber Fees for
Non-Display Usage. There will be no
substantive change to the Professional
Subscriber fees for Non-Display Usage
set forth in Nasdaq Rule 7023(b)(4),
which already allows for the purchase
of all three depth-of-book products,
including OpenView, TotalView and
Level 2, under the same fee structure.
Explicit references to OpenView will be
deleted as a technical, conforming
change.
3. Enterprise License Fees. There will
be no substantive change to the
enterprises [sic] license fees set forth in
Nasdaq Rules 7023(c)(1), (c)(2) and
(c)(3), which already allow for the
purchase of depth-of-book products,
including OpenView and TotalView,16
for the same fee. Explicit references to
OpenView will be deleted as a
technical, conforming change.
4. Per Subscriber Fees for Enhanced
Display Solutions. The monthly fee for
Professional Subscribers using EDS will
be changed from $74 for TotalView and
Level 2 and $6 for OpenView 17 to $80
for TotalView, which will include all
OpenView data, and Level 2. NonProfessional Subscribers of EDS will
continue to pay at the applicable
TotalView or Level 2 rates.18 Explicit
references to OpenView will be deleted
as a technical, conforming change.
5. Enhanced Display Solution
Enterprise License. The monthly
professional subscriber fee for
purchasers of an enterprise license with
EDS will be changed from $70 for
TotalView and Level 2 and $6 for
OpenView 19 to $76 for TotalView,
which will include all OpenView data,
and Level 2.
6. Managed Data Solutions. There
will be no substantive change to the fee
structure for MDS set forth in Rule
7026(b), which already allows for the
distribution of all three depth-of-book
products, including OpenView,
TotalView and Level 2, under the same
fee structure. Explicit references to
13 Nasdaq
Rule 7023(b)(3)(A).
Rule 7023(b)(2)(B). Fees are for Display
Usage, or for Non-Display Usage based upon
indirect access.
15 Nasdaq Rule 7023(b)(3)(B).
16 Level 2 data is included under Nasdaq Rule
7023(c)(3).
17 Nasdaq Rule 7026(a)(1)(B).
18 Id.
19 Nasdaq Rule 7026(a)(1)(C).
14 Nasdaq
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OpenView will be deleted as a
technical, conforming change.
In addition to all of these changes, the
definition of OpenView will be removed
from the current Rule book at Rule
7023(a)(1)(B), and the data provided in
OpenView will be added to the
definition of TotalView currently in
Rule 7023(a)(1)(C), which will be redesignated as Rule 7023(a)(1)(B).
The proposed rule change will lower
administrative costs and simplify the
purchase of depth-of-book products,
with no impact on fees for most
customers. Almost all purchasers of
depth products already purchase
OpenView in conjunction with
TotalView or Level 2, and prices will
not change for these customers. Most of
the limited number of customers
purchasing TotalView or OpenView
alone are in the process of phasing out
the practice, and will not be materially
affected by the proposed change.
Depth-of-book customers that
purchase TotalView and OpenView
together have to manage separate
reporting, billing and approvals for two
products that they utilize as a single
product. The resulting administrative
burden applies to four separate
categories of fees: (i) Non-Professional
per Subscriber fees for TotalView 20 and
OpenView; 21 (ii) Professional
Subscriber fees for TotalView 22 and
OpenView; 23 (iii) monthly fees for
Professional and Non-Professional
Subscribers using EDS; 24 and (iv)
monthly subscriber fees for purchasers
of an EDS enterprise license.25 The
proposed change will lessen the
administrative burden on these
customers—representing the bulk of
depth-of-book purchasers—while
leaving fees and product quality
unaffected.
Nasdaq has engaged in discussions
with Distributors that purchase
OpenView without TotalView or Level
2—or TotalView or Level 2 without
OpenView—and determined that this
practice is being phased out. This
practice had its origins before Nasdaq
became an Exchange, when Nasdaq did
not trade a significant number of
securities listed on other exchanges.
Now, Nasdaq routinely trades the
securities of other exchanges, and the
rationale for this practice is obsolete. As
such, Nasdaq does not expect merging
OpenView into TotalView to have a
long-term impact on customers that are
20 Nasdaq
Rule 7023(b)(2)(A).
Rule 7023(b)(3)(A).
22 Nasdaq Rule 7023(b)(2)(B).
23 Nasdaq Rule 7023(b)(3)(B).
24 Nasdaq Rule 7026(a)(1)(B).
25 Nasdaq Rule 7026(a)(1)(C).
21 Nasdaq
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already in the process of deciding
whether to purchase either both
products, or neither, because of
fundamental changes in the economic
environment. The proposed fee
change—which leaves the total cost of
OpenView and TotalView unchanged—
is unlikely to alter that decision.
No transition time is needed to merge
OpenView into TotalView—they are
already offered in a compatible formats
[sic] and Distributors require no time to
modify their systems to accommodate
the change.
The proposed fees are optional in that
they apply only to firms that elect to
purchase these products. The proposed
changes do not impact the cost of any
other Nasdaq product.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,26 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,27 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 28
Likewise, in NetCoalition v. Securities
and Exchange Commission 29
(‘‘NetCoalition’’) the D.C. Circuit upheld
the Commission’s use of a market-based
approach in evaluating the fairness of
market data fees against a challenge
claiming that Congress mandated a costbased approach.30 As the court
emphasized, the Commission ‘‘intended
in Regulation NMS that ‘market forces,
rather than regulatory requirements’
play a role in determining the market
26 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
28 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
29 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
30 See NetCoalition, at 534–535.
27 15
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data . . . to be made available to
investors and at what cost.’’ 31
Further, ‘‘[n]o one disputes that
competition for order flow is ‘fierce.’
. . . As the SEC explained, ‘[i]n the U.S.
national market system, buyers and
sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’ . . . .’’ 32
The Exchange believes that the
proposal to integrate Nasdaq TotalView
and OpenView into a single depth-ofbook product is an equitable allocation
of reasonable dues, fees or other
charges. Almost all purchasers of
Nasdaq depth-of-book products already
treat TotalView and OpenView as a
single, combined product, and the
proposed changes will reduce
administrative burden. Customers that
do not currently purchase both products
are already in the process of deciding
whether to purchase either both
products, or neither, and the proposed
fee change—which leaves the total cost
of OpenView and TotalView
unchanged—is unlikely to alter that
decision. The fees for TotalView and
OpenView, like all proprietary data fees,
are constrained by the Exchange’s need
to compete for order flow, and are
subject to competition from other
products and among broker-dealers for
customers. If Nasdaq is incorrect in its
assessment of these markets, there are
no barriers to entry for competitors with
substantially similar products.
The Exchange believes that the
proposed fee changes are an equitable
allocation because the fees
appropriately reflect the value of depthof-market data to customers as well as
industry practice in which most
customers purchase the current versions
of TotalView and OpenView
concurrently. The proposed fee changes
are not unfairly discriminatory because
the Exchange will apply the same fee to
all similarly-situated subscribers.
inter-market competition, the Exchange
notes that it operates in a highly
competitive market in which market
participants can readily favor competing
venues if they deem fee levels at a
particular venue to be excessive. In such
an environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to exchanges. Because competitors are
free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
The question of whether the prices of
depth-of-view products are constrained
by competitive forces was examined in
2016 by an Administrative Law Judge in
an application for review by the
Securities Industry and Financial
Markets Association of actions taken by
Self-Regulatory Organizations.33 After a
four-day hearing and presentation of
substantial evidence, the administrative
law judge stated that ‘‘competition plays
a significant role in restraining exchange
pricing of depth-of-book products’’ 34
because ‘‘depth-of-book products from
different exchanges function as
substitutes for each other,’’ 35 and, as
such, ‘‘the threat of substitution from
depth-of-book customers constrains
their depth-of-book prices.’’ 36 In
addition, the administrative law judge
stated that ‘‘[s]hifts in order flow and
threats of shifting order flow provide a
significant competitive force in the
pricing of . . . depth-of-book data.’’ 37
As such, Nasdaq’s depth-of-book fees
are ‘‘constrained by significant
competitive forces.’’ 38 As an example of
the impact of market forces on the price
of proprietary data, the Exchange
recently lowered the Nasdaq Basic
enterprise license fee for the
distribution of certain information by
broker-dealers from $350,000 to
$100,000.39
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. In terms of
33 Securities Industry and Financial Markets
Association, Initial Decision Release No. 1015, 2016
SEC LEXIS 2278 (A.L.J. June 1, 2016).
34 Id. at 33.
35 Id.
36 Id.
37 Id. at 37.
38 Id. at 43.
39 See Securities Exchange Act Release No. 79456
(December 2, 2016) 81 FR 88716 (December 8, 2016)
(SR–NASDAQ–2016–162) (fee decrease for an
enterprise license for the distribution of Nasdaq
Basic to Non-Professional and Professional
Subscribers with whom the broker-dealer has a
brokerage relationship).
31 Id.
at 537.
at 539 (quoting Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR
74770, 74782–83 (December 9, 2008) (SR–
NYSEArca–2006–21)).
32 Id.
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The proposed changes will integrate
Nasdaq TotalView and OpenView into a
single depth-of-book product. If the
proposed product revisions are
unattractive to market participants, it is
likely that the Exchange will lose
market share.
Market forces constrain fees for
TotalView, like all depth-of-book
products, in three respects. First, all fees
related to TotalView are constrained by
competition among exchanges and other
entities attracting order flow. Firms
make decisions regarding depth-of-book
products and other proprietary data
based on the total cost of interacting
with the Exchange, and order flow
would be harmed by the
supracompetitive pricing of any
proprietary data product. Second, the
prices of TotalView are constrained by
the existence of substitutes that are
offered, or may be offered, by entities
that offer proprietary data. Third,
competition among Distributors for
customers will further constrain the cost
of TotalView.
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Competition for Order Flow
Fees related to TotalView are
constrained by competition among
exchanges and other entities seeking to
attract order flow. Order flow is the ‘‘life
blood’’ of the exchanges. Broker-dealers
currently have numerous alternative
venues for their order flow, including
self-regulatory organization (‘‘SRO’’)
markets, as well as internalizing brokerdealers (‘‘BDs’’) and various forms of
alternative trading systems (‘‘ATSs’’),
including dark pools and electronic
communication networks (‘‘ECNs’’).
Each SRO market competes to produce
transaction reports via trade executions,
and two FINRA-regulated Trade
Reporting Facilities (‘‘TRFs’’) compete
to attract internalized transaction
reports. The existence of fierce
competition for order flow implies a
high degree of price sensitivity on the
part of BDs, which may readily reduce
costs by directing orders toward the
lowest-cost trading venues.
The level of competition and
contestability in the market for order
flow is demonstrated by the numerous
examples of entrants that swiftly grew
into some of the largest electronic
trading platforms and proprietary data
producers: Archipelago, Bloomberg
Tradebook, Island, RediBook, Attain,
TracECN, and the BATS exchanges. A
proliferation of dark pools and other
ATSs operate profitably with
fragmentary shares of consolidated
market volume. For a variety of reasons,
competition from new entrants,
especially for order execution, has
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increased dramatically over the last
decade.
Each SRO, TRF, ATS, and BD that
competes for order flow is permitted to
produce proprietary data products.
Many currently do or have announced
plans to do so, including NYSE, NYSE
Amex, NYSE Arca, the BATS
exchanges, and IEX. This is because
Regulation NMS deregulated the market
for proprietary data. While BDs had
previously published their proprietary
data individually, Regulation NMS
encourages market data vendors and
BDs to produce proprietary products
cooperatively in a manner never before
possible. Order routers and market data
vendors can facilitate production of
proprietary data products for single or
multiple BDs. The potential sources of
proprietary products are virtually
limitless.
The markets for order flow and
proprietary data are inextricably linked:
A trading platform cannot generate
market information unless it receives
trade orders. As a result, the
competition for order flow constrains
the prices that platforms can charge for
proprietary data products. Firms make
decisions on how much and what types
of data to consume based on the total
cost of interacting with Nasdaq and
other exchanges. Data fees are but one
factor in a total platform analysis. If the
cost of the product exceeds its expected
value, the broker-dealer will choose not
to buy it. A supracompetitive increase
in the fees charged for either
transactions or proprietary data has the
potential to impair revenues from both
products. In this manner, the
competition for order flow will
constrain prices for proprietary data
products.
Substitute Products
The price of depth-of-book data is
constrained by the existence of
competition from other exchanges, such
as NYSE and the BATS exchanges,
which sell proprietary depth-of-book
data. While a small number of highly
sophisticated traders purchase depth-ofbook products from multiple exchanges,
most customers do not. Because most
customers would not pay an excessive
price for TotalView when substitute
data is available from other proprietary
sources, the Exchange is constrained in
its pricing decisions.
Competition Among Distributors
Competition among Distributors
provides another form of price
discipline for proprietary data products
to ensure that fees are equitable, fair,
reasonable and not unfairly
discriminatory. If the price of TotalView
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27321
were set above competitive levels,
Distributors purchasing TotalView
would be at a disadvantage relative to
their competitors, and would therefore
either purchase a substitute or forego
the product altogether.
In summary, market forces constrain
the price of depth-of-book data such as
TotalView through competition for
order flow, competition from substitute
products, and in the competition among
vendors for customers.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 40 and
subparagraph (f)(6) of Rule 19b–4
thereunder.41
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
40 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
41 17
E:\FR\FM\14JNN1.SGM
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27322
Federal Register / Vol. 82, No. 113 / Wednesday, June 14, 2017 / Notices
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2017–054 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
mstockstill on DSK30JT082PROD with NOTICES
All submissions should refer to File
Number SR–NASDAQ–2017–054. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2017–054, and should be
submitted on or before July 5, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.42
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–12267 Filed 6–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
[Release No. 34–80762; File No. SR–DTC–
2017–007]
The Exchange proposes to extend the
operation of Penny Pilot Program
through December 31, 2017. The text of
the proposed rule change is provided
below.
(additions are in italics; deletions are
[bracketed])
*
*
*
*
*
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Modify the
DTC Settlement Service Guide To Make
Technical Revisions To Clarify and
Provide Enhanced Transparency With
Respect to the Calculation and
Adjustment of Required Participants
Fund Deposits
Correction
In notice document 2017–11151,
beginning on page 25038, in the issue of
Wednesday, May 31, 2017, make the
following correction:
1. On page 25041, in the first column,
in the last sentence, ‘‘June 20, 2017’’
should read ‘‘June 21, 2017’’.
[FR Doc. C1–2017–11151 Filed 6–13–17; 8:45 am]
BILLING CODE 1301–01–D
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80883; File No. SR–CBOE–
2017–045]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to the Penny
Pilot Program
June 8, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 31,
2017, Chicago Board Options Exchange,
Incorporated (the ‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II,
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:36 Jun 13, 2017
Jkt 241001
PO 00000
Frm 00099
*
*
*
*
*
Rule 6.42. Minimum Increments for
Bids and Offers
May 24, 2017.
1 15
42 17
Chicago Board Options Exchange,
Incorporated Rules
Fmt 4703
Sfmt 4703
The Board of Directors may establish
minimum increments for options traded
on the Exchange. When the Board of
Directors determines to change the
minimum increments, the Exchange
will designate such change as a stated
policy, practice, or interpretation with
respect to the administration of Rule
6.42 within the meaning of
subparagraph (3)(A) of subsection 19(b)
of the Exchange Act and will file a rule
change for effectiveness upon filing
with the Commission. Until such time
as the Board of Directors makes a
change to the minimum increments, the
following minimum increments shall
apply to options traded on the
Exchange:
(1) No change.
(2) No change.
(3) The decimal increments for bids
and offers for all series of the option
classes participating in the Penny Pilot
Program are: $0.01 for all option series
quoted below $3 (including LEAPS),
and $0.05 for all option series $3 and
above (including LEAPS). For QQQQs,
IWM, and SPY, the minimum increment
is $0.01 for all option series. The
Exchange may replace any option class
participating in the Penny Pilot Program
that has been delisted with the next
most actively-traded, multiply-listed
option class, based on national average
daily volume in the preceding six
calendar months, that is not yet
included in the Pilot Program. Any
replacement class would be added on
the second trading day following
[January 1, 2017] July 1, 2017. The
Penny Pilot shall expire on [June 30,
2017] December 31, 2017.
(4) No change.
. . . Interpretations and Policies:
.01–.04 No change.
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s Web
site (https://www.cboe.com/AboutCBOE/
*
E:\FR\FM\14JNN1.SGM
14JNN1
]]>Agencies
[Federal Register Volume 82, Number 113 (Wednesday, June 14, 2017)]
[Notices]
[Pages 27318-27322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12267]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80891; File No. SR-NASDAQ-2017-054]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Merge the OpenView Depth-of-Book Product Into TotalView
June 8, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 26, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to merge the OpenView depth-of-book product
into TotalView, and to amend the Exchange's fees at Rules 7023 and 7026
to reflect the merger of these two products, as described further
below. The Exchange has designated the proposed amendments to be
operative on August 1, 2017.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaq.cchwallstreet.com, at the principal office of
the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
fees at Rules 7023 and 7026 to merge the OpenView depth-of-book product
into TotalView.
TotalView and OpenView
TotalView, the Exchange's complete depth data feed product for
Nasdaq-listed securities, provides every eligible order at every price
level for all Nasdaq members, as well as Net Order Imbalance
information.\3\ OpenView--almost universally purchased in conjunction
with Nasdaq's other depth-of-book products, TotalView and Level 2 \4\--
provides the same information as TotalView for stocks listed on other
exchanges.
---------------------------------------------------------------------------
\3\ Net Order Imbalance information provides data relating to
buy and sell interest at the open and close of the trading day, in
the context of an Initial Public Offering, and after a trading halt.
\4\ See Securities Exchange Act Release No. 79863 (January 23,
2017) 82 FR 8632 (January 27, 2017) (SR-NASDAQ-2017-004) (explaining
that Level 2 will be retired as a separate product).
---------------------------------------------------------------------------
TotalView and OpenView may be purchased through monthly
subscription fees or enterprise license fees. Different fee structures
apply if purchasers opt to view TotalView or OpenView using an Enhanced
Display Solution (``EDS'') or utilize the data in a non-display fashion
using a Managed Data Solution (``MDS''). The current fees associated
with TotalView and OpenView that will be affected by the proposed
changes, set forth in Rules 7023 and 7026, are as follows:
1. Per Subscriber Fees. Monthly Non-Professional per Subscriber
fees are $14 for TotalView,\5\ and $1 for OpenView.\6\ Monthly
Professional Subscriber fees are $70 for TotalView,\7\ and $6 for
OpenView.\8\
---------------------------------------------------------------------------
\5\ Nasdaq Rule 7023(b)(2)(A).
\6\ Nasdaq Rule 7023(b)(3)(A).
\7\ Nasdaq Rule 7023(b)(2)(B). Fees are for Display Usage, or
for Non-Display Usage based upon indirect access.
\8\ Nasdaq Rule 7023(b)(3)(B). Fees are for Display Usage, or
for Non-Display Usage based upon indirect access.
---------------------------------------------------------------------------
2. Professional Subscriber Fees for Non-Display Usage. The
professional Subscriber fees for Non-Display Usage
[[Page 27319]]
based upon direct access set forth in Rule 7023(b)(4) allow for the
purchase of all depth-of-book products, including TotalView, Level 2
and OpenView, for one fee.\9\
---------------------------------------------------------------------------
\9\ The Rule 7023(b)(4) fees are based on the number of
Subscribers; the fee structure allows a Subscriber to obtain any
combination of TotalView, Level 2 and OpenView, or all three
products, for the same per Subscriber fee.
---------------------------------------------------------------------------
3. Enterprise License Fees. The enterprises [sic] license fees set
forth in Nasdaq Rules 7023(c)(1) and (c)(2) allow for the purchase of
TotalView and OpenView, and the enterprise license fees at 7023(c)(3)
allow for the purchase of all three depth-of-book products, including
TotalView, Level 2 and OpenView, under the same fee structure.\10\
---------------------------------------------------------------------------
\10\ The enterprise license fees set forth in Rules 7023(c)(1)
and 7023(c)(2) are comprised of two components: An enterprise
license fee and per-Subscriber monthly fees. A Distributor may
obtain any combination of TotalView, Level 2 and OpenView, or all
three products, for the same enterprise license and per-Subscriber
monthly fees under Rules 7023(c)(1) and (c)(2). The fee structure
set forth in Rule 7023(c)(3) is an enterprise license fee without
per-Subscriber monthly fees. A Distributor may obtain any
combination of TotalView, Level 2 and OpenView, or all three
products, for the enterprise license fee set forth in Rule
7023(c)(3).
---------------------------------------------------------------------------
4. Per Subscriber Fees for Enhanced Display Solutions. The monthly
fee for Professional Subscribers using EDS under Rule 7026(a)(1)(B) is
$74 for TotalView and Level 2 and $6 for OpenView. Non-Professional
Subscribers of EDS pay the applicable TotalView, Level 2 or OpenView
rates.\11\
---------------------------------------------------------------------------
\11\ Nasdaq Rule 7026(a)(1)(B).
---------------------------------------------------------------------------
5. Enhanced Display Solution Enterprise License. The EDS enterprise
license set forth in Rule 7026(a)(1)(C) allows TotalView and Level 2 to
be distributed to an unlimited number of Professional Subscribers for
$70, and OpenView for $6.
6. Managed Data Solutions. Rule 7026(b) sets forth a fee structure
for MDS that applies the same fees for the distribution of TotalView,
Level 2 and OpenView.
Proposed Changes
The Exchange proposes to amend the fees at Rules 7023 and 7026 to
merge OpenView into TotalView. In substance, the Exchange will combine
all fees for TotalView and OpenView into a single sum, without
increasing the total price of the two products, and make a number of
conforming changes to delete specific references to OpenView. The
specific fee changes to Rules 7023 and 7026 are as follows:
1. Per Subscriber Fees. Monthly Non-Professional per Subscriber
fees will be changed from $14 for TotalView \12\ and $1 for OpenView
\13\ to $15 for TotalView, which will be redefined in current Rule
7023(a)(1)(C) to include OpenView data. Monthly Professional Subscriber
fees will be changed from $70 for TotalView \14\ and $6 for OpenView
\15\ to $76 for TotalView, which will include OpenView data.
---------------------------------------------------------------------------
\12\ Nasdaq Rule 7023(b)(2)(A).
\13\ Nasdaq Rule 7023(b)(3)(A).
\14\ Nasdaq Rule 7023(b)(2)(B). Fees are for Display Usage, or
for Non-Display Usage based upon indirect access.
\15\ Nasdaq Rule 7023(b)(3)(B).
---------------------------------------------------------------------------
2. Professional Subscriber Fees for Non-Display Usage. There will
be no substantive change to the Professional Subscriber fees for Non-
Display Usage set forth in Nasdaq Rule 7023(b)(4), which already allows
for the purchase of all three depth-of-book products, including
OpenView, TotalView and Level 2, under the same fee structure. Explicit
references to OpenView will be deleted as a technical, conforming
change.
3. Enterprise License Fees. There will be no substantive change to
the enterprises [sic] license fees set forth in Nasdaq Rules
7023(c)(1), (c)(2) and (c)(3), which already allow for the purchase of
depth-of-book products, including OpenView and TotalView,\16\ for the
same fee. Explicit references to OpenView will be deleted as a
technical, conforming change.
---------------------------------------------------------------------------
\16\ Level 2 data is included under Nasdaq Rule 7023(c)(3).
---------------------------------------------------------------------------
4. Per Subscriber Fees for Enhanced Display Solutions. The monthly
fee for Professional Subscribers using EDS will be changed from $74 for
TotalView and Level 2 and $6 for OpenView \17\ to $80 for TotalView,
which will include all OpenView data, and Level 2. Non-Professional
Subscribers of EDS will continue to pay at the applicable TotalView or
Level 2 rates.\18\ Explicit references to OpenView will be deleted as a
technical, conforming change.
---------------------------------------------------------------------------
\17\ Nasdaq Rule 7026(a)(1)(B).
\18\ Id.
---------------------------------------------------------------------------
5. Enhanced Display Solution Enterprise License. The monthly
professional subscriber fee for purchasers of an enterprise license
with EDS will be changed from $70 for TotalView and Level 2 and $6 for
OpenView \19\ to $76 for TotalView, which will include all OpenView
data, and Level 2.
---------------------------------------------------------------------------
\19\ Nasdaq Rule 7026(a)(1)(C).
---------------------------------------------------------------------------
6. Managed Data Solutions. There will be no substantive change to
the fee structure for MDS set forth in Rule 7026(b), which already
allows for the distribution of all three depth-of-book products,
including OpenView, TotalView and Level 2, under the same fee
structure. Explicit references to OpenView will be deleted as a
technical, conforming change.
In addition to all of these changes, the definition of OpenView
will be removed from the current Rule book at Rule 7023(a)(1)(B), and
the data provided in OpenView will be added to the definition of
TotalView currently in Rule 7023(a)(1)(C), which will be re-designated
as Rule 7023(a)(1)(B).
The proposed rule change will lower administrative costs and
simplify the purchase of depth-of-book products, with no impact on fees
for most customers. Almost all purchasers of depth products already
purchase OpenView in conjunction with TotalView or Level 2, and prices
will not change for these customers. Most of the limited number of
customers purchasing TotalView or OpenView alone are in the process of
phasing out the practice, and will not be materially affected by the
proposed change.
Depth-of-book customers that purchase TotalView and OpenView
together have to manage separate reporting, billing and approvals for
two products that they utilize as a single product. The resulting
administrative burden applies to four separate categories of fees: (i)
Non-Professional per Subscriber fees for TotalView \20\ and OpenView;
\21\ (ii) Professional Subscriber fees for TotalView \22\ and OpenView;
\23\ (iii) monthly fees for Professional and Non-Professional
Subscribers using EDS; \24\ and (iv) monthly subscriber fees for
purchasers of an EDS enterprise license.\25\ The proposed change will
lessen the administrative burden on these customers--representing the
bulk of depth-of-book purchasers--while leaving fees and product
quality unaffected.
---------------------------------------------------------------------------
\20\ Nasdaq Rule 7023(b)(2)(A).
\21\ Nasdaq Rule 7023(b)(3)(A).
\22\ Nasdaq Rule 7023(b)(2)(B).
\23\ Nasdaq Rule 7023(b)(3)(B).
\24\ Nasdaq Rule 7026(a)(1)(B).
\25\ Nasdaq Rule 7026(a)(1)(C).
---------------------------------------------------------------------------
Nasdaq has engaged in discussions with Distributors that purchase
OpenView without TotalView or Level 2--or TotalView or Level 2 without
OpenView--and determined that this practice is being phased out. This
practice had its origins before Nasdaq became an Exchange, when Nasdaq
did not trade a significant number of securities listed on other
exchanges. Now, Nasdaq routinely trades the securities of other
exchanges, and the rationale for this practice is obsolete. As such,
Nasdaq does not expect merging OpenView into TotalView to have a long-
term impact on customers that are
[[Page 27320]]
already in the process of deciding whether to purchase either both
products, or neither, because of fundamental changes in the economic
environment. The proposed fee change--which leaves the total cost of
OpenView and TotalView unchanged--is unlikely to alter that decision.
No transition time is needed to merge OpenView into TotalView--they
are already offered in a compatible formats [sic] and Distributors
require no time to modify their systems to accommodate the change.
The proposed fees are optional in that they apply only to firms
that elect to purchase these products. The proposed changes do not
impact the cost of any other Nasdaq product.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\26\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\27\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \28\
---------------------------------------------------------------------------
\28\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Likewise, in NetCoalition v. Securities and Exchange Commission
\29\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of
a market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\30\ As the court emphasized, the Commission ``intended in
Regulation NMS that `market forces, rather than regulatory
requirements' play a role in determining the market data . . . to be
made available to investors and at what cost.'' \31\
---------------------------------------------------------------------------
\29\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\30\ See NetCoalition, at 534-535.
\31\ Id. at 537.
---------------------------------------------------------------------------
Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers' . . . .'' \32\
---------------------------------------------------------------------------
\32\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------
The Exchange believes that the proposal to integrate Nasdaq
TotalView and OpenView into a single depth-of-book product is an
equitable allocation of reasonable dues, fees or other charges. Almost
all purchasers of Nasdaq depth-of-book products already treat TotalView
and OpenView as a single, combined product, and the proposed changes
will reduce administrative burden. Customers that do not currently
purchase both products are already in the process of deciding whether
to purchase either both products, or neither, and the proposed fee
change--which leaves the total cost of OpenView and TotalView
unchanged--is unlikely to alter that decision. The fees for TotalView
and OpenView, like all proprietary data fees, are constrained by the
Exchange's need to compete for order flow, and are subject to
competition from other products and among broker-dealers for customers.
If Nasdaq is incorrect in its assessment of these markets, there are no
barriers to entry for competitors with substantially similar products.
The Exchange believes that the proposed fee changes are an
equitable allocation because the fees appropriately reflect the value
of depth-of-market data to customers as well as industry practice in
which most customers purchase the current versions of TotalView and
OpenView concurrently. The proposed fee changes are not unfairly
discriminatory because the Exchange will apply the same fee to all
similarly-situated subscribers.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In terms of inter-market
competition, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
The question of whether the prices of depth-of-view products are
constrained by competitive forces was examined in 2016 by an
Administrative Law Judge in an application for review by the Securities
Industry and Financial Markets Association of actions taken by Self-
Regulatory Organizations.\33\ After a four-day hearing and presentation
of substantial evidence, the administrative law judge stated that
``competition plays a significant role in restraining exchange pricing
of depth-of-book products'' \34\ because ``depth-of-book products from
different exchanges function as substitutes for each other,'' \35\ and,
as such, ``the threat of substitution from depth-of-book customers
constrains their depth-of-book prices.'' \36\ In addition, the
administrative law judge stated that ``[s]hifts in order flow and
threats of shifting order flow provide a significant competitive force
in the pricing of . . . depth-of-book data.'' \37\ As such, Nasdaq's
depth-of-book fees are ``constrained by significant competitive
forces.'' \38\ As an example of the impact of market forces on the
price of proprietary data, the Exchange recently lowered the Nasdaq
Basic enterprise license fee for the distribution of certain
information by broker-dealers from $350,000 to $100,000.\39\
---------------------------------------------------------------------------
\33\ Securities Industry and Financial Markets Association,
Initial Decision Release No. 1015, 2016 SEC LEXIS 2278 (A.L.J. June
1, 2016).
\34\ Id. at 33.
\35\ Id.
\36\ Id.
\37\ Id. at 37.
\38\ Id. at 43.
\39\ See Securities Exchange Act Release No. 79456 (December 2,
2016) 81 FR 88716 (December 8, 2016) (SR-NASDAQ-2016-162) (fee
decrease for an enterprise license for the distribution of Nasdaq
Basic to Non-Professional and Professional Subscribers with whom the
broker-dealer has a brokerage relationship).
---------------------------------------------------------------------------
[[Page 27321]]
The proposed changes will integrate Nasdaq TotalView and OpenView
into a single depth-of-book product. If the proposed product revisions
are unattractive to market participants, it is likely that the Exchange
will lose market share.
Market forces constrain fees for TotalView, like all depth-of-book
products, in three respects. First, all fees related to TotalView are
constrained by competition among exchanges and other entities
attracting order flow. Firms make decisions regarding depth-of-book
products and other proprietary data based on the total cost of
interacting with the Exchange, and order flow would be harmed by the
supracompetitive pricing of any proprietary data product. Second, the
prices of TotalView are constrained by the existence of substitutes
that are offered, or may be offered, by entities that offer proprietary
data. Third, competition among Distributors for customers will further
constrain the cost of TotalView.
Competition for Order Flow
Fees related to TotalView are constrained by competition among
exchanges and other entities seeking to attract order flow. Order flow
is the ``life blood'' of the exchanges. Broker-dealers currently have
numerous alternative venues for their order flow, including self-
regulatory organization (``SRO'') markets, as well as internalizing
broker-dealers (``BDs'') and various forms of alternative trading
systems (``ATSs''), including dark pools and electronic communication
networks (``ECNs''). Each SRO market competes to produce transaction
reports via trade executions, and two FINRA-regulated Trade Reporting
Facilities (``TRFs'') compete to attract internalized transaction
reports. The existence of fierce competition for order flow implies a
high degree of price sensitivity on the part of BDs, which may readily
reduce costs by directing orders toward the lowest-cost trading venues.
The level of competition and contestability in the market for order
flow is demonstrated by the numerous examples of entrants that swiftly
grew into some of the largest electronic trading platforms and
proprietary data producers: Archipelago, Bloomberg Tradebook, Island,
RediBook, Attain, TracECN, and the BATS exchanges. A proliferation of
dark pools and other ATSs operate profitably with fragmentary shares of
consolidated market volume. For a variety of reasons, competition from
new entrants, especially for order execution, has increased
dramatically over the last decade.
Each SRO, TRF, ATS, and BD that competes for order flow is
permitted to produce proprietary data products. Many currently do or
have announced plans to do so, including NYSE, NYSE Amex, NYSE Arca,
the BATS exchanges, and IEX. This is because Regulation NMS deregulated
the market for proprietary data. While BDs had previously published
their proprietary data individually, Regulation NMS encourages market
data vendors and BDs to produce proprietary products cooperatively in a
manner never before possible. Order routers and market data vendors can
facilitate production of proprietary data products for single or
multiple BDs. The potential sources of proprietary products are
virtually limitless.
The markets for order flow and proprietary data are inextricably
linked: A trading platform cannot generate market information unless it
receives trade orders. As a result, the competition for order flow
constrains the prices that platforms can charge for proprietary data
products. Firms make decisions on how much and what types of data to
consume based on the total cost of interacting with Nasdaq and other
exchanges. Data fees are but one factor in a total platform analysis.
If the cost of the product exceeds its expected value, the broker-
dealer will choose not to buy it. A supracompetitive increase in the
fees charged for either transactions or proprietary data has the
potential to impair revenues from both products. In this manner, the
competition for order flow will constrain prices for proprietary data
products.
Substitute Products
The price of depth-of-book data is constrained by the existence of
competition from other exchanges, such as NYSE and the BATS exchanges,
which sell proprietary depth-of-book data. While a small number of
highly sophisticated traders purchase depth-of-book products from
multiple exchanges, most customers do not. Because most customers would
not pay an excessive price for TotalView when substitute data is
available from other proprietary sources, the Exchange is constrained
in its pricing decisions.
Competition Among Distributors
Competition among Distributors provides another form of price
discipline for proprietary data products to ensure that fees are
equitable, fair, reasonable and not unfairly discriminatory. If the
price of TotalView were set above competitive levels, Distributors
purchasing TotalView would be at a disadvantage relative to their
competitors, and would therefore either purchase a substitute or forego
the product altogether.
In summary, market forces constrain the price of depth-of-book data
such as TotalView through competition for order flow, competition from
substitute products, and in the competition among vendors for
customers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \40\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\41\
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\40\ 15 U.S.C. 78s(b)(3)(A)(iii).
\41\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 27322]]
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2017-054 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2017-054. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2017-054, and should
be submitted on or before July 5, 2017.
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\42\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-12267 Filed 6-13-17; 8:45 am]
BILLING CODE 8011-01-P
